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The Federal Reserve left rates unchanged but put a hike in September back in focus. Markets were mixed as prospects for strong economic growth were offset by rekindled trade-war concerns. Here are some of the things people in markets are talking about.

Fed Strikes Hawkish Tone

The Federal Reserve took a hawkish tilt Wednesday, leaving the benchmark interest rate unchanged but citing “strong” economic growth. The committee said it expects that “further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the committee’s symmetric 2 percent objective,” repeating language from its June statement. The comments put expectations for a September hike back in focus.

Markets Tempered

U.S. stocks were mixed and Treasuries held on to losses after the Fed signaled its intention to raise rates amid a robust economy. The S&P 500 Index edged lower as investors weighed trade tensions between the world’s two largest economies with positive earnings for Apple Inc., which rose to a record. Industrial shares fell as a measure of manufacturing trailed estimates. The yield on 10-year Treasuries touched 3 percent for the first time since June. Emerging markets struggled to gain traction amid heightened trade-war rhetoric. The Turkish lira slumped to a record low on a report the U.S. is preparing a list of sanctions targets.

U.S. Considering Higher Tariffs

The Trump administration said it’s weighing whether to increase the proposed tariff on $200 billion of Chinese goods to 25 percent from 10 percent, stepping up pressure on Beijing to change its trade practices. President Donald Trump asked the U.S. Trade Representative’s office to seek public input on the proposed tariff increase, two senior administration officials said on a conference call with reporters Wednesday. The duties could be implemented as early as next month. The move to more than double the levy may inflame already heightened tensions between the two countries. 

PBOC Attempts to Spur Lending

China’s central bank has started actively encouraging banks to extend more credit by taking a softer stance on loan quotas, people familiar said, as authorities ratchet up efforts to bolster a cooling economy. The PBOC has delivered the message via so-called window guidance, said the people. The central bank hasn’t provided specific targets, but it indicated a willingness to be more flexible on banks’ government-imposed lending caps, the people said. While China has taken several steps to free up credit in recent weeks, the central bank’s latest interactions with lenders suggest official efforts have intensified. One executive at a large state-owned bank said the firm exceeded its year-to-date lending quota, judging that the PBOC would be less strict in enforcing the cap. A smaller bank focused on small-business lending had its quota raised by more than 50 percent in August from the previous month, a person with knowledge of the matter said.

Tesla Weighs Chinese Funding

Tesla Inc., under fire from investors for burning through cash as it ramps up production, will look to China to at least partially fund the cost of building its first factory in the world’s fastest-growing auto market. The electric-car pioneer is considering raising some of the $5 billion it intends to invest in the plant near Shanghai from local partners, according to a person familiar with the plans. The company reported a wider-than-expected third-quarter loss, but forecast being profitable on a GAAP basis in both the third and fourth quarters. It’s aiming to produce 6,000 Model 3s a week by the end of August, with deliveries outpacing production this quarter. Have a look at Bloomberg’s Model 3 tracker for an estimate of weekly output. 

What we’ve been reading

This is what caught our eye over the last 24 hours.

• Google is preparing to launch a censored version of its search engine for China.
• Bitcoin’s use in commerce keeps falling, even as volatility eases.
• Here’s how Malaysia’s 1MDB scandal reaches around the world.
• Manufacturers around the world are putting the brakes on production.
• Germany toughened its stance on China, blocking a possible deal for the first time.
• Wall Street firms are sneaking a “Weinstein clause” into some deals.
• Tourists are swapping their Japan guide books for Instagram.

To contact the editor responsible for this story: Adam Haigh at ahaigh1@bloomberg.net

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